Planning and saving for retirement is one of the wisest financial decisions you can make in your youth. No one can work and earn forever, and building saving for your retirement years helps you lead a comfortable life in old age. The first step to retirement planning is to set a long-term financial goal. Determine the sum of money you will need and invest accordingly to build a corpus.
Although you can begin saving for retirement anytime, it is best to start early. It gives your money more time to grow and earn money for retirement. This article discusses seven tips to plan your retirement savings and secure an enjoyable and safe retirement for yourself.
- Save for retirement Now – The best time to start saving for retirement is as early as possible. Explore investing in EPF and EPS schemes from the beginning of your career. They offer reasonable interest rates at low risk and are considered lucrative long-term investments for retirement planning. Invest in a retirement savings plan from a young age to grow your savings, build wealth, and get tax benefits from investment. It will help ensure a good income despite inflation and economic changes in your old age.
- Be Prepared for Future Financial Emergencies – Focusing on long-term financial goals such as retirement is good. But it is also essential to stay prepared for financial emergencies. Apart from saving for retirement, dedicate a part of your savings to building an emergency fund. Your emergency fund should be enough to cover your expenses for six months to one year comfortably. Keep this emergency fund removed from your bank account for monthly expenses. If you are prepared to face an unexpected financial crunch, you will not need to dip into your retirement savings or any other long-term investment to cover your expenses.
- Explore Various Life Insurance Options – Buying insurance is vital to any investment plan. In the unfortunate circumstance of your demise, you can rest assured that your family will be cared for. A protective cover for your loved ones in your unfortunate absence is invaluable in the modern world. Compare the different life insurance policies available and invest in a good life insurance plan besides planning your retirement savings.
- Diversify Your Investments – Remember to diversify your investments to minimize risk when investing in the long term. Per the adage, don’t keep all your eggs in one basket. If all your money is invested in one asset class or industry, you may incur a massive loss if that investment fails. So, choose from various investment avenues and build a diverse portfolio to reduce risk.
- Buy an Appropriate Health Cover – Illnesses are a part of life, especially in old age. But even at a young age, health insurance can be beneficial. Health emergencies can crop up without warning, and insurance coverage can help you pay medical bills. Another benefit of purchasing health insurance when you are young is that your premiums are low, and your illness waiting period is taken care of. It will help cover the cost of consultation, medicines, and hospitalization whenever required. As you age, lifestyle diseases may bother you – and having appropriate health insurance coverage will prepare you to face the medical expenditure for it.
- Be Wary of Inflation – Financial planning without considering inflation would be fundamentally flawed. Inflation may rise or fall in the future, but it will never vanish. Everyone should factor in an average of 5 to 6% of inflation when planning for retirement or any future financial goals. 100GBP cannot buy as much as they could ten years ago, and ten years hence, it will be worth even lesser – thanks to inflation. So, if you invest in term plans, choose the plan that offers annual increments in the assured sum. You could also invest in equity plans to combat inflation as they provide better returns.
- Reduce Your Debt – One of the benefits of retirement planning is that you can also plan your debt payments together with the retirement fund to ensure that you retire debt free at your targeted age. Calculate your debts, including mortgage, car loan, student loans, and credit card debts – and design a debt repayment plan to pay off your debts before you retire. That way, you needn’t spend on debt repayment in your retirement years.
When we are young, we think of retirement as a distant reality and that we have plenty of time to plan for it. However, the right time to begin planning for retirement is when you are young. It will give you enough time to build your wealth to retire comfortably. You can rest assured that you will have enough funds to live comfortably, pay medical bills, and spend time on your hobbies in your old age. Think your investments through, and don’t take on any debts you cannot repay before retirement age. Follow the tips above to have a robust retirement financial plan.